Wendy's International (NYSE:WEN) shares jumped over 10% last week after the company announced that it was considering putting itself up for sale. The move comes after billionaire investor Nelson Peltz and former shareholder Bill Ackman pressured the company to boost its stock price. The two first persuaded Wendy's to spin off Tim Hortons, a coffee and doughnut chain, in September and sell its Baja Fresh chain in November. But activist shareholders and finally managed to convince the board that this simply is not enough.
The company still owns a lot of undervalued assets including about half as many locations as McDonald's. Investors argue that there is a lot of money tied up in these assets that could easily catch the interest of a financial buyer or perhaps even a strategic buyer. Financial buyers are attracted to the company's cash flows and real estate, which can be used to repay the debt borrowed to finance the transaction. Strategic buyers may be interested in the large scale of Wendy's operations; however, some argue that it may be too expensive for most strategic buyers. Whether or not a sale actually takes place remains to be seen; however, WEN is definitely a stock to
keep an eye on as this situation unfolds!
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